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<P>THE DETERMINANTS OF SPATIAL CONCENTRATION: THE MANUFACTURING AND SERVICE SECTORS IN AN NTERNATIONAL PERSPECTIVE</P>
<P><BR>PONTUS BRAUNERHJELM AND DAN JOHANSSON</P>
<P><BR>After being neglected for several decades, the forces and implications of the<BR>locational pattern of firms have recently become a focal issue in economic<BR>analysis.1 The questions addressed stretch from general equilibrium effects of alterations<BR>in costs of production and costs of market access on the location of production,<BR>to issues of a more partial character, such as local network externalities, industrial<BR>districts and spillover effects.<BR>Particular attention has been paid to agglomeration forces, i.e. to what extent<BR>production is concentrated to geographically well-defined regions. Since concentration<BR>of production tends to increase the costs of locally available factors of production,<BR>one question concerns the exact nature of the benefits of spatial concentration<BR>required to overcome such cost disadvantages. The dominant theoretical rationale for<BR>‘‘agglomeration economies’’ to occur relies on productivity effects. In particular, spatial<BR>concentration of economic activities occurs in order to either exploit economies of<BR>scale or reap the benefits of pecuniary (demand and supply linkages) and nonpecuniary<BR>(knowledge) spillovers (Ciccone and Hall 1996; Fujita et al. 1999).<BR>Furthermore, these factors interact with trade costs, i.e. the costs of supplying a<BR>market from a more distant location.<BR>Despite the considerable theoretical advances made in this field of economics,<BR>empirical research is surprisingly scarce. Notable exceptions are studies on the<BR>regional dispersion of production in the USA (Ellison and Glaeser 1994, 1997; Kim<BR>1995, 1999; Hanson 1998). There are also a couple of papers studying the effect of<BR>the European integration process on concentration of production (Amiti 1998;<BR>Haaland et al. 1998; Midelfart-Knarvik et al. 2000), but remarkably few consider<BR>spatial concentration within countries. Building on the work by Ellison and Glaeser,<BR>Maurel and Sedillot (1999) have recently presented a comparison of regional concentration<BR>of the manufacturing sector in France and the USA, however.<BR>The purpose of this paper is to draw on these previous contributions, particularly<BR>the studies by Ellison and Glaeser (1997) and Maurel and Sedillot (1999), in order to<BR>examine the spatial concentration of Swedish production, and how it compares with<BR>that of France and the USA. This will be achieved by implementing a unique Swedish<BR>data-set embracing total Swedish production at the four-digit ISIC level for the years<BR>1975 and 1993, which contains detailed information on regional distribution of<BR>production, size classes, trade costs and knowledge intensity.<BR>The analysis will be pursued stepwise. First, we will examine the pattern of<BR>spatial concentration at an aggregate level, emphasizing the differences between—<BR>and the dynamics within—the manufacturing and service industries by calculating<BR>Ellison–Glaeser concentration indexes (henceforth denoted EG-indexes) for 1975<BR>and 1993. As an alternative measure of concentration, we will also present results<BR>based on locational Gini-coefficients. In addition, a comparison of regional concentration<BR>in France, Sweden and the USA will be presented. Second, through regression<BR>analysis, we proceed with a detailed analysis of regional concentration in the Swedish<BR>manufacturing sector. More precisely, we test to what extent knowledge intensity,<BR>production technology, transportation costs, raw material intensity, initial regional<BR>concentration and, finally, the size and growth of industries, are capable of explaining<BR>geographically concentrated production structures.<BR>The rest of the paper is organized as follows. In the next section, we briefly<BR>survey some of the more influential and important research contributions in this area.<BR>We then present the measures of geographical concentration that will be implemented<BR>in the analysis. Thereafter, data, empirical method and the hypotheses are discussed,<BR>followed by the results of the empirical model, and then some concluding remarks.</P>